Red Bull Racing, US Navy tech and being transparent - Five things you need to know about Anglian Water's new £6.5bn plan
PUBLISHED: 12:59 04 September 2018 | UPDATED: 12:57 05 October 2018
Anglian Water has revealed how it wants to spend £6.5bn to protect the region's water supplies in the coming years. Business editor Mark Shields takes a look at five things we learned from the plan.
Resilience (or you don’t know what you’ve got till it’s gone)
This was one of the watchwords in Anglian Water’s plan – in short, making sure that there’s water when we turn on the tap.
Of course, that means it’s something that’s only noticed by its absence: when resilience measures fail, customers are left without water.
When pointing to the importance of investing in resilience, boss Peter Simpson flagged up the company’s response to the Beast from the East when, well, almost nothing happened.
Of the 200,000 homes left without water for an extended period of time in the UK, just 163 were in Anglian Water’s patch, earning the company recognition from industry watchdog Ofwat for its performance. It also avoided imposing hosepipe bans or other restrictions during the summer heatwave.
That, said Anglian Water, reflected the money it had poured into spreading risks and building back-ups to water supplies – such as the £15m East Hills waterworks in Costessey opened in 2011 to reduce the pressure on the Heigham treatment works serving the city.
By 2025, just 10% of customers will be served by one water treatment works, compared to 40% currently.
Getting up to speed with Red Bull Racing
While other companies have been learning from its industry-leading work on leaks and water efficiency, Anglian Water has been examining other industries to see what it can glean.
That included visits to Red Bull Racing in Milton Keynes to see how the Formula 1 team develops new components at speed and under pressure.
While a typical Anglian Water component might have 150 changes between iterations – “a tough process” – the lesson from Red Bull was an eye-opener, said Mr Simpson.
“It tests your thinking. We used to think about making changes, and a lot of the engineering systems we had used to make it quite difficult. We made 100-150 changes, and it was quite clunky.
“They made something like 13,000 changes to their cars in a matter of four or five races of the season – and they went faster. We thought we were good at this, but it reset the paradigm for us.”
The company has also learned from other automotive companies, particularly about modular manufacturing for buildings – putting together complex parts off-site to be assembled in situ.
“If we’re going to build a new treatment works we will build it in a factory environment, on a manufacturing production line, and then bring it to site as a series of Lego blocks,” said Mr Simpson. “That’s completely different to how we would have done it a few years ago which is basically turn up on site and start pouring concrete.”
Going underground... with US Navy technology
While Anglian Water’s record on leaks is the best in the country, it means that it has to look harder for improvement – and in doing so has employed technology first developed in the US Navy.
The previous technique – noise-logging correlation – relied on, in simple terms, listening for the sound of water coming out of a pipe. But the submarine technology developed by the navy, known as hydrophone technology, detects noise through the column of water.
“What that enables you to do is much better locate leaks across much larger distances and across different pipe materials,” said Mr Simpson.
“The problem with the other technologies is they were good on some materials like cast-iron but really difficult on plastic.”
He added: “[The technology] is taking us to a new frontier in being able to identify leaks.”
Under its five-year plan, Anglian Water is investing £240m to cut leaks by 22% across its 40,000km of pipes. It already has the biggest telemetry system in Europe, helping it to monitor pressure and flow readings across the network and identify where to focus its attentions.
“The real success in leakage is knowing where to go, so that when the team roll up on site they dig the hole and that’s the leak to repair,” said Mr Simpson.
For a company in the water business, being crystal clear ought to be an advantage.
But the industry has endured a torrid time of late, with peers such as Thames Water coming under pressure for its poor record on leaks while shareholders enjoyed bumper payouts, and environment secretary Michael Gove warning the sector of its “concerning” behaviour.
Anglian Water has sought to distance itself from those concerns through a raft of transparency measures announced in May.
They include becoming the first company to offload its unused subsidiary in the Cayman Islands, repaying an intra-company loan and changing its board structure to include a majority of independent non-executive directors.
The company points to its recognition as Responsible Business of the Year by Business in the Community last year as evidence that its reputation is different to others in the industry.
Of the transparency measures, Mr Simpson said: “Our owners and board wanted were particularly keen to differentiate ourselves and move ahead so that we didn’t get caught up in some of the accusations around what was going on.”
Bills, bills, bills
For many, this will be the only measure of the plan that matters – what it’s going to cost the customer.
The average bill – which the company says is today £423 a year across its four million customers – will rise by 0.9% at the start of the period (2020-2025) but will have returned to current levels by the end, and continue at that level to 2030.
At the start of the last plan, in 2014-15, the average bill stood at £469.
But shareholders are also “putting their money where their mouth is” by taking smaller dividends so that the money can be reinvested in the business, says Anglian Water.
The company highlights the 500,000 people who took part in the consultation over the plan, in particular the 80% who said they would be willing to pay up to 2.5% extra to deliver priorities including fewer leaks, extra environmental protection and greater resilience for the 200,000 new homes forecast to be built in the region by 2025.
“If we hadn’t had the big ramp-up to deal with growth and for the environment, then bills would have been going down by 3-4%,” said Mr Simpson.
“In the previous five years we had the biggest bill reduction of any water company, a reduction of 10%. There will be other companies which will have bill reductions, but they won’t have a 30% increase in investment.”
Anglian Water also has a package of measures to help 475,000 customers who struggle with their bills.